A new bill aimed at reforming the City of Industry wants to limit the potential for corruption by forcing the city to change how it handles business contracts and housing.

In his bill, California Senator Ed Hernandez states the provisions are a “statewide concern” that trumps Industry’s rights as a charter city.

“I understand it’s going to be an uphill battle,” Hernandez said. “I also believe it needs to be brought to attention, I don’t want to see stuff like this happening again.”

How the new bill would reform Industry

Senate Bill 1236 requires that Industry rent no more than 5 percent of its city-owned housing to its employees, its elected and appointed officials and their family members. It also would require that Industry follow state law – rather than city ordinances – when selecting contractors for city projects. Other provisions would cap the council’s pay and call for annual audits.

Industry Councilman Newell Ruggles said Hernandez’s bill unfairly targets the city and the council has already begun fixing many of the issues Hernandez’s legislation aims to address. Still, officials want to work with Hernandez, Ruggles said.

“We’re more than happy to work with him to come to some agreement,” he said. “Give us the opportunity to make some changes.”

It’s not easy to change company towns in California. A push by former Assembly Speaker John Perez in 2011 to dissolve Vernon resulted in a drag out battle that ultimately saw the legislation defeated. Vernon adopted some reforms on its own as a compromise, but not everyone agrees they’ve effectively eliminated potential corruption.

Hernandez said he isn’t opposed to negotiating reforms directly with Industry, but he doesn’t intend to stop his legislation unless they can come to some sort of agreement. He said he believes that recent scandals in Vernon and Bell will help him find support when the bill comes to a vote.

“Until we come up with that, I want to have the bill moving, so that I can keep them at the negotiation table,” Hernandez said.

He expects Industry to use its vast resources to fight the bill through lobbying.

Why some think the bill doesn’t go far enough

Gil Aguirre, an open government advocate, said while he thinks Hernandez’s bill is a good step, it doesn’t do nearly enough.

“I appreciate what Senator Hernandez is trying to do, but what he really needs to be looking at is revamping those laws for the entire state,” Aguirre said.

The bill shouldn’t target just Industry, especially if charter cities are part of the problem, he said.

Hernandez’s bill, as written now, does not include any provisions for enforcement.

Aguirre said one of the reasons Industry continues to have issues is because no one has gone after it for providing subsidized housing to high income employees or for its lax bidding process that has allowed the same companies to continuously profit from it.

“If they really want to clamp down on Industry, they’ve had years to do it,” he said.

Why Hernandez wants to reform Industry

Hernandez’s reform push comes after an internal audit found that Industry paid $326 million over the past 20 years to companies tied to former Mayor David Perez and his family.

Part of the bill would require that Industry follow the Public Contract Code when putting contracts out to bid. Charter cities, like Industry, can pass exemptions or local ordinances that conflict and supercede the state law, according to Hernandez’s bill.

Hernandez hopes that by forcing Industry to follow the state’s code, it’ll bring more openness to their contracting process. Several of Industry’s largest contractors have kept lucrative deals with the city for decades, with some arrangements dating back as far as the city’s founding.

“My bottom line goal is to make sure that when I term out in three years, that six years from now we don’t hear this same story over and over,” Hernandez said.

How changing housing rules could drastically change Industry

To truly change Industry, Hernandez said the city can not continue to own so much of the city’s housing. About half belongs to Industry, while the rest belongs to Perez. Very few houses are owner-occupied.

Hernandez’s limit on the tenants would evict nearly every tenant in Industry, as most have ties to the City Council. Four of the five council members live in the discounted homes, with the remaining houses going to their friends, their family members, and people employed by the city’s biggest contractors.

The city doesn’t require paper applications or proof of income and handpicks the tenants, who in turn vote in the city’s elections. Only about 100 registered voters live in Industry.

Tenants in the city-owned homes pay between $600 and $700 for houses that would go for double or more in surrounding neighborhoods. An investigation by this news organization showed that Industry did not pay taxes on the subsidized rent it provided to employees.

Renters, including Former City Manager Kevin Radecki, would have paid over a $1 million more, collectively, if Industry charged market rate during the six years reviewed by this newspaper.

SB 1236 also calls for the city to limit Industry’s council pay to less than $1,000 a month and for annual audits that comply with governmental standards. An audit by the state controller found Industry had almost no financial controls and those deficiencies put it at risk for fraud and corruption.

Ruggles and two other council members won seats at the dais last summer in Industry’s first contested election in 20 years. They replaced a fourth seat with an appointment after a long-time councilman resigned. All four have ties to Perez.

Industry in the process of making changes

Ruggles said he and his colleagues don’t oppose every part of Hernandez’s bill because they’re already fixing some of the areas targeted.

They’ve issued several requests for bids and contracted with PlanetBid to update their process.

The city recently hired a superintendent to monitor work sites and analysts to review all of the its contracts.

City Manager Paul Philips asked all city employees to leave their city-owned houses. That forced about five people and their families out, but left many of the city’s other homes occupied by people who serve on a board or who have close ties to city hall. The five employees were expected to move out this week after receiving a 90-day notice in January.

Ruggles, who Perez supported in the election, said he wants to change how Industry handles housing, but not to the extreme that Hernandez’s bill requires. He said that would allow only one council member to remain in their home.

“Maybe we could come to some kind of agreement, some middle ground on this,” Ruggles said.

The rest would have to relocate, and with Perez owning most of the other homes, it would make them even more reliant on the former mayor, he said.

“I understand his intent, but it’s not going to help anything, it might make things worse,” he said. “They’re going to have to move into a Perez house, or find some other place to live, but there’s not many options.”

Jason Henry is a staff reporter for the San Gabriel Valley Tribune and Pasadena Star-News. He covers Pasadena, the Jet Propulsion Laboratory, Caltech and the City of Industry. Raised in Ohio, Jason began his career at a suburban daily near Cleveland before moving to California in 2013. He is a self-identified technophile, data nerd and a wannabe drone pilot. The 2011 graduate of Bowling Green State University likes to shock his city friends by sharing his hometown's population.

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